Idea Transcript
Wisdom and wealth A workbook for wealth creation
Sound familiar? You likely shape your life around relationships with parents, siblings, spouses, children, friends and co-workers. But like many people, you may have neglected an important relationship that frames your life — your relationship with money. Why is it easier to invest yourself in others than to invest in yourself? These quotes offer some insight into the financial paralysis that afflicts many: “I’m too busy with today to plan for the future.” True, we lead busy lives today. But if you don’t plan for your future, no one else will either. “I don’t have enough money to invest.” Yes, you do. You just have to make retirement savings a priority. “I don’t know much about money or investing.” Financial illiteracy is a choice — a bad choice too many people make to their economic detriment. Learning about money and investing can bolster your confidence. “I have no idea what my net worth is.” Welcome to square one. Knowing your net worth is the beginning of taking charge of your finances. If these sentiments sound familiar, your relationship with money may need a little therapy. You work hard for your money — now make it do the same for you.
Where do you begin? You probably already have. Whether you are paying bills or balancing your checkbook, these money management skills are essential for taking charge of your financial affairs. So you’re off to a good start. Keep going by becoming actively involved with your finances. Start with this to-do list of financial fundamentals: • Organize and update your financial information. • Determine your net worth. • Create a budget and stay on it. • Pay off debt and avoid creating new debt. • Maintain an excellent credit rating. • Monitor your credit rating annually and correct errors. • Set aside money for emergencies. • Check your Social Security contribution history for accuracy. • Locate professionals to help you with financial and estate planning.
Are you done yet? No … like other important relationships, your relationship with money requires a lifelong commitment. Although that may seem daunting, the timeline on page 2 simplifies the challenge by listing financial considerations for each decade. Not all may apply to your situation. For example, a person who marries and has children in their 20s has different needs from a person who remains single or marries later. But, over the decades of your life, these suggestions can help you pursue your financial goals. Keep in mind that your financial, investment and estate planning needs change as your life changes. That’s why it’s important to work with your financial professional and insurance and estate planning professionals throughout your life.
Wisdom & wealth: A workbook for wealth creation 1
Considerations during your: Twenties –– Learn about your job benefits, including the retirement program. –– Get into the habit of saving for retirement. –– If your employer doesn’t offer a retirement program, open an IRA. Thirties –– Put as much as you can into retirement savings. –– Open an IRA if you leave the workplace. –– Establish a college savings account if you have children. –– Don’t borrow from your retirement savings.
–– Don’t pay for benefits you don’t need; for example, you may not need life insurance if you are single with no dependents. –– Establish credit in your name.
–– Determine the best way to handle a retirement account if you change jobs. –– Make a will and estate plan.
Forties –– Start focusing on retirement plans and establish a retirement savings goal. –– Continue to put as much as you can into retirement savings. –– Continue saving for college.
–– Decide what type of college your child will attend and whether grants or scholarships will be required. –– Talk with your aging parents about their health care and long-term care insurance needs.
Fifties –– Revisit your retirement plans and consider when you want to retire. –– Start crunching numbers to determine if your retirement savings goal is on target.
–– Contribute the maximum amount allowed to your retirement plan. –– Take advantage of catch-up contributions if you’re behind in your retirement savings.
Sixties –– Continue to max out contributions to your retirement plan and make catch-up contributions. –– Explore retirement savings distribution options with your financial professional. –– Determine whether to roll over your 401(k) into an IRA. –– Establish a definite plan for retirement and begin the transition. –– Consider work options if you can’t afford to retire or want to continue working.
–– Apply for Medicare three months before turning 65. –– Explore options — such as employer-provided insurance, Medigap insurance and prescription drug coverage — for meeting health care needs. –– Determine when you want to begin receiving Social Security; the earlier you begin receiving it, the less the benefit. –– Talk with your children about your estate and health care planning.
Seventies –– Begin taking required minimum distributions from –– Work with your financial professional to make your retirement accounts at age 70½. sure you’re on a distribution track that will enable you to live out your life comfortably. –– Revisit your estate planning.
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But what if? Good question. As you know, life is full of ripple-effect events, and many of them affect your financial and retirement planning. So, no matter the decade, talk with your financial professional after these life-changing events: • Marriage • Birth or adoption • Job loss or change • Separation or divorce • Business startup • Death of your spouse or child • Inheritance • Disability for you or your spouse
Ready to start? This workbook will help you organize your finances — a vital first step toward financial self-sufficiency and wealth creation. Begin by completing these worksheets starting on page 5. • Financial/Personal information location worksheet • Financial/Personal records worksheet • Net worth calculation worksheet • Monthly spending worksheet
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Workbook
Financial/Personal information location worksheet List the location of applicable items: Birth certificate(s) Adoption papers Marriage license/certificate Citizenship papers Social Security cards Military service records G.I. insurance papers Employee benefit plan information Life insurance policy Health care insurance policy Disability insurance policy Auto insurance policy Homeowner’s/renter’s insurance policy Other insurance policy Type Location Type Location Mortgage/real estate documents Auto title(s) Property title(s)/deed(s) Cemetery plot title(s) Business documents Safe deposit box Box #
Location of key
People who have access Stock/bond certificates Will(s)/trust documents Tax records
Wisdom & wealth: A workbook for wealth creation 5
Financial/Personal information location worksheet (continued) Loan documents Type of loan Location Type of loan Location Type of loan Location Type of loan Location Other documents Type Location Type Location Type Location Type Location
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Financial/Personal records worksheet Personal/family information Family member
SS#
DOB
Family member
SS#
DOB
Family member
SS#
DOB
Family member
SS#
DOB
Family member
SS#
DOB
Family member
SS#
DOB
Family member
SS#
DOB
Family member
SS#
DOB
Family member
SS#
DOB
Important contacts Financial professional
Phone
Address Attorney
Phone
Address Accountant
Phone
Address Insurance agent
Phone
Address Insurance agent
Phone
Address Employer human resources contact
Phone
Address Employer human resources contact
Phone
Address Clergy/spiritual advisor
Phone
Address Estate executor
Phone
Address Guardian/trustee
Phone
Address Other
Phone
Address
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Financial/Personal records worksheet (continued) Bank accounts Type
Account #
Web access
Bank name
Name(s) on account
Type
Account #
Bank name
Name(s) on account
Type
Account #
Bank name
Name(s) on account
Type
Account #
Bank name
Name(s) on account
Web access
Web access
Web access
Investment accounts Type
Account #
Web access
Broker/sponsor
Name(s) on account
Type
Account #
Broker/sponsor
Name(s) on account
Type
Account #
Broker/sponsor
Name(s) on account
Type
Account #
Broker/sponsor
Name(s) on account
Web access
Web access
Web access
Credit cards Issuer
Account #
Web access
Name(s) on account Issuer
Account #
Web access
Name(s) on account Issuer
Account #
Web access
Name(s) on account Issuer
Account #
Web access
Name(s) on account Issuer
Account #
Web access
Name(s) on account Issuer
Account #
Web access
Name(s) on account
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Net worth calculation worksheet Date:
Cash Value Cash on hand $ Checking account balance $ Savings account balance $ Certificates of deposit $ Credit union account balance $ Money owed to you $ Tax refund $ Cash value of life insurance $ Stocks/bonds $ Mutual fund shares $ Other:
$
Investments/retirement accounts Value Stocks/bonds $ Mutual fund shares $ Retirement plan $ IRA $ Profit sharing plan $ Treasury bills $ Other:
$
Personal Value Home equity $ Cars $ Furniture $ Other personal property $ Jewelry/art/collectibles $ Other:
$
Total assets $
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Net worth calculation worksheet (continued) Liabilities Amount owed Mortgage $ Car loan(s) $ Installment loan(s) $ Credit card debt $ Student loan(s) $ 401(k) loan(s) $ Personal loan(s) $ Insurance/taxes due $ Other:
$
Total liabilities $ Determine your net worth: Total assets $ Minus total liabilities –
Net worth $
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Monthly spending worksheet Date:
Do you control your money, or does it control you? Creating a budget — and sticking to it — is a basic step toward financial self-sufficiency and achieving your goals. This worksheet can help you take that step.
Step 1: Calculate expenses for the past 12 months.
For example, add up your electricity bills for the past 12 months and divide by 12 for a monthly average. Fixed expenses Monthly average Rent/mortgage $ Homeowner’s insurance $ Property taxes $ Car loan(s) $ Car insurance/gas/maintenance/commuting $ Personal loans/school loans $ Bank charges $ Child care $ Educational expenses $ Utilities (electricity, gas, water) $ Telephone/cell phone $ Cable/Internet $ Medical/dental $ Groceries $ Household repairs/maintenance $ Investments/retirement/savings $ Other:
$
Discretionary expenses Monthly average Monthly goal Clothing $
$
Charitable/other contributions $
$
Credit card payments $
$
Dining/entertainment/recreation $
$
Gifts given $
$
Haircuts/salon $
$
Subscriptions $
$
Travel/vacation $
$
Other:
$
$
Total monthly expenses $
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Step 2: Calculate monthly income. Net income (include wages and tips) $ Spouse’s/partner’s net income $ Alimony $ Child support $ Other (Social Security, pension, trust) $
Total and divide by 12 Bonus or commission $ Dividend income $ Gifts received $ Interest income $ Investment income/capital gains $ Other:
$
Total monthly income $
Step 3: Subtract monthly expenses from monthly income. Total monthly income $ Minus total monthly expenses –
Difference
= $
Congratulations. You’ve just taken the first step toward creating a realistic budget. Now ask yourself these questions: • Is my income greater than my expenses? • If so, am I putting the extra cash to work for me? • Are my expenses greater than my income? • If so, how can I take control of my money? Look carefully at your monthly expenses and identify areas where you can cut back. While there may be little wiggle room in some fixed expenses, you may be able to reduce spending for groceries or save money by driving less or readjusting your thermostat. How about discretionary expenses? You can probably reduce or eliminate some. List ways that you can reduce monthly expenses on the lines below. Now you have a monthly budget. Stick to it, talk to your financial professional about putting the savings to work for you and reassess your spending at least annually.
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You’re on your way
Just as you invest yourself in relationships to enrich your life, you can invest in your future by developing a productive relationship with money. By completing this workbook, you’ve started down the road to financial self-sufficiency and wealth creation. But you’ll likely need some help along the way.
Talk to your financial professional
Your sights are set on a financial summit — a college degree, new home or secure retirement. One of the best ways to help reach your goal is to partner with a strong team: a financial professional who can provide sound guidance based on your individual needs and an investment company that can deliver a broad range of diversified strategies. Talk to your financial professional about how an investment plan and Invesco can help you pursue your financial goals.
Explore High-Conviction Investing with Invesco
At Invesco, we’re dedicated to delivering an investment experience that helps you get more out of life. Our comprehensive range of high-conviction investment capabilities is designed to help you build portfolios in more precise and impactful ways, and not just settle for average. This high-conviction approach is built on three core tenets: A pure focus on investing
All we do is investment management. That means we are solely focused on delivering high-conviction portfolio solutions to meet your unique needs.
Diversity of thought
Each of our investment teams is empowered to implement its own trusted investment philosophy and process. Our diverse range of capabilities allows you to create high-conviction portfolios custom-built for your needs.
Passion to exceed
We are passionate about going beyond average to uncover high-conviction opportunities and provide an exceptional client experience.
This information is not intended as legal or tax advice. Investors should consult an attorney or tax advisor. invesco.com/us
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